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24 Mar 2018 17:03
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  •   Home > News > International

    Donald Trump blocks $150b Qualcomm takeover by Broadcom on national security grounds

    In a move likely to increase trade tensions with China, US President Donald Trump scuttles what would have been the world's biggest technology takeover to protect the US's biggest microchip maker and 5G leader.

    United States President Donald Trump has blocked the $US117 billion ($150 billion) takeover of the nation's leading 5G mobile communications developer by Singapore-based technology giant Broadcom, citing national security fears.

    Mr Trump said there was credible evidence that lead him to believe that Broadcom's pursuit of US's biggest microchip maker Qualcomm "threatens to impair the national security".

    In presidential order Mr Trump used his powers under the Defence Production Act and the International Emergency Economic Powers Act to scuttle what would have been the largest takeover deal yet in the technology sector.

    While not directly citing China in the order, the White House is understood to be concerned about Broadcom's relationships with foreign entities, including Chinese telecommunications giant Huawei Technologies.

    San Diego-based Qualcomm is the US champion in the next-generation 5G mobile market, owning around 15 per cent of patents in the technology, ahead of Nokia with 11 per cent and China with 10 per cent.

    While Qualcomm is the world's fourth-largest chip maker, it still found itself being stalked by the smaller, but aggressively growing Broadcom after an unsolicited bid was lobbed last November.

    Qualcomm has been fighting Broadcom's advances and had been lobbying US Committee on Foreign Investment in the United States (CFIUS) to block the deal.

    Concerns about Chinese 5G dominance

    Earlier this month, CFIUS confirmed it was investigating the deal and gave a very clear indication of its concerns.

    "A shift to Chinese dominance in 5G would have substantial negative national security consequences for the United States," a CFIUS official wrote in a letter to Broadcom management.

    "While the United States remains dominant in the standards-setting space currently, China would likely compete robustly to fill any void left by Qualcomm as a result of this hostile takeover."

    While it is only the fifth time a US president has used CFIUS objections to block a foreign takeover, it is the second by the Trump administration in the past year.

    Mr Trump had earlier used his veto powers to scuttle the Chinese government-backed Canyon Bridge Capital Partners' attempt to buy the Lattice Semiconductor Corp in September.

    It the second time in recent weeks the President has raised "national security" in trade related matters, having said it was central in his decision to impose hefty tariffs on imported steel and aluminium.

    It is will also do little to ease mounting tensions with China over trade with a decision to apply broad-based sanctions over allegations of intellectual property theft likely in coming months.

    Treasury Secretary Steven Mnuchin, who also chairs CFIUS, said the Qulacomm decision "is based on the facts and national security sensitivities related to this particular transaction only".

    The CFIUS action is considered highly unusual as the investigation started before investors had an opportunity to vote on it, or a deal had been signed.

    The blocking of the deal also comes just months after Mr Trump stood next to Broadcom chief executive Hock Tan at the White House, announcing the company's decision to move its headquarters to the United States and calling it "one of the really great, great companies".


    © 2018 ABC Australian Broadcasting Corporation. All rights reserved

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